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Filching a Good Name for Internet Use?

PARIS — A search for “Louis Vuitton” on Google’s British Web site turns up an advertisement for “Designer Handbags 70% off” — to the fury of LVMH, the French luxury goods conglomerate that owns the brand.

Not only are the handbags fake, LVMH Moët Hennessy Louis Vuitton says, but when unauthorized parties buy its trademarks as keywords to generate search ads, its own cost of using those brand names on Google soars.

LVMH and a number of other companies want Google to stop the practice, and a European court ruling expected Tuesday is shaping up to be the biggest test of its legality. Analysts say millions of euros are at stake, in a case with significant implications for the use of the Internet as a marketing tool for brand owners and as a moneymaker for Google.

Google has faced similar lawsuits in the United States, but it has settled some of them, and no clear precedents have been established. So legal experts say the decision by the European Court of Justice in Luxembourg will be watched closely around the world.

“It’s going to be the first time we’re going to get a high court reviewing the legality of these kinds of business practices,” said David Bernstein, a trademark expert at the law firm of Debevoise & Plimpton in New York.

Google says AdWords, its search advertising system, complies with trademark law because it blocks advertisers in Europe from using others’ brand names in the actual texts of sponsored links. Google also removes links to counterfeiters’ sites, like the one advertising discounted handbags, when brand owners or consumers complain.

Google says it wants to be able to sell branded keywords to a variety of bidders because users of its search engine want to see ads for other sites, including those carrying product reviews and secondhand goods, and not just the brands’ official sites.

“We believe that consumer interest is best served by maximizing the choice of keywords, ensuring relevant and informative advertising for a wide variety of different contexts,” the company said in a statement.

But Google’s policy on sales of keywords to third parties varies by country. In France, court rulings have required Google to block the sale of such keywords at the request of the trademark owner. In other countries, including Britain and the United States, Google has moved to liberalize the practice. In the United States, Google even allows advertisers to use a rival’s brand name in the text of an ad in some cases.

“Under trademark law anywhere in the world, brand owners have the right to stop third parties from using their names,” said Pierre Godé, an LVMH board member and adviser to the chairman, Bernard Arnault. “Why make an exception for the digital world?”

After several French courts ruled in favor of LVMH in a battle that began in 2003, Google turned to the highest appeals court in France, which sent the case to the Luxembourg court for clarification of the main issues.

An adviser to the European court with the title of advocate general largely sided with Google in a nonbinding opinion published last year. The advocate general, Luís Miguel Poiares Pessoa Maduro, said it was very unlikely that consumers would be misled by the practice, a major test in many trademark cases.

The advocate general did say, however, that he thought Google could be held liable if it sold keywords to counterfeiters or other trademark violators.

Over all, the advocate general’s opinion was seen as a rare bit of good news for Google on the European legal front, where it has recently faced adverse rulings in a privacy case in Italy and a copyright lawsuit in France.

Neither Google nor LVMH has said how much money is at stake, but hints have emerged in a separate lawsuit that began in Britain and that has also been referred to the European court. In that case Interflora, the online florists’ network, sued the retailer Marks & Spencer, which had bought the Interflora keyword on Google as a way to promote the Marks & Spencer flower delivery service.

Interflora said that when Google loosened its trademark policy in Britain two years ago, making it easier for third parties to buy others’ brands as keywords, the cost of buying its own name rose from 2 pence per click to as much as 28 pence, or 42 cents, per click, costing it an additional $750,000 in the first year.

Multiply that figure by the scores of brands that rely on Google across a number of European markets, and the total quickly adds up.

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For Google, that revenue goes straight to the bottom line. Brand owners, however, face a double loss, said Hannah Kimuyu, director of paid search at Greenlight, a London-based agency that specializes in search advertising, and whose clients include Interflora.

Not only do they have to spend more to protect their brands, but they also lose sales to competitors or counterfeiters.

“Obviously, if everyone is bidding on everyone else’s brand, it inflates the cost and undermines the value of the brand,” she said. “We just saw it as a ploy for Google to make more money out of the industry.”

Marketers cannot ignore Google because it controls more than 80 percent of the search market across Europe, she said. That share is now the subject of a preliminary antitrust investigation by the European Commission in Brussels.

Since Google changed its policy on search terms in Britain, the practice in question has become widespread, especially among online retailers, travel agencies and other sites that depend heavily on search engines for traffic.

In an effort to keep costs from rising, some marketers have reached “gentlemen’s agreements” not to buy each other’s brand names as keywords, Ms. Kimuyu said.

Meanwhile, companies like Greenlight have benefited, because they have created technology that helps brand owners track the use of their names.

Richard Stables, chief executive of an online price comparison site called Kelkoo, said that his company sometimes employed the tactic of using a trademark name and that he saw nothing wrong with it.

“You live and die by the marketplace, and this is something you’ve got to live with,” he said.

But for luxury goods companies like LVMH, accustomed to keeping close tabs on the use of their trademarks, the idea that their brand names might be a useful tool for other marketers, even indirectly, is vexing.

LVMH and other European brand owners have fought a series of battles with Internet companies. Last year, a French court ordered eBay to pay LVMH more than €38 million, or $51 million, in damages, saying the online auction site was doing too little to stop the sale of fakes; eBay is appealing.

Lawyers say that ultimately, court rulings may not provide the clarity that brand owners and Internet companies need to avoid future clashes, so legislation may be needed.

“Nobody wants to clamp down completely on the Internet and neuter it,” said Kirsten Gilbert, a specialist in trademark law at Marks & Clerk Solicitors in London.

“AdWords has been a great business model for Google, but brand owners have done quite well out of the Internet, too.”